Icahn May Go After Yahoo (YHOO); Decision Today

Yahoo's stock (YHOO) abruptly reversed its long, slow slide to $20 on news that Carl Icahn may launch a proxy fight for the company. Scott Galloway, an activist investor who recently forced his way onto the New York Times board, is also said to be considering making a play.

According to CNBC, Icahn has begun accumulating a position of as many as 50 million shares (about 3.5% of the company's stock). The WSJ says he'll decide tomorrow whether to pursue a proxy fight.

If the goal is to get Yahoo's board fired at the July shareholder meeting, there are only two days left before the Thursday deadline by which Icahn (or anyone else) must file a hostile slate of directors. Given this, unless Icahn has been secretly assembling a slate for the past ten days (possible), it seems more likely that his plan is to pressure Jerry to sell the company to Microsoft (MSFT) in a friendly deal.

Based on the comments Yahoo's largest shareholder Gordon Crawford of Capital Research and Management made after the deal fell apart ("I am extremely angry at Jerry Yang"), Icahn would likely have significant shareholder support, at least in secret (many public shareholders don't want to be seen as activists.

CNBC suggests that Icahn might assemble a "short slate" aimed a few of Yahoo's board seats--with which he'll then turn the heat up under Jerry... The WSJ says he hasn't yet made a decision about whether to file a full slate, partial slate, or nothing.

Icahn also has been unable to get a confirmation that Microsoft will
return to the negotiating table should all or part of Yahoo's board be
replaced, but unlike other investors, Icahn may choose to forge ahead
anyway.

If he does, he seems likely to run a so-called
short slate of directors, targeting perhaps three or four of Yahoo's
ten board seats.

It
would be a risky strategy especially because beyond a deal to sell out
to Microsoft, there don't appear to be too many levers to pull in order
to create near-term shareholder value.

If
Icahn were to win those three or four board seats - as would seem
highly likely given investor disenchantment with Yahoo's board -
chances are good he could force a deal with Microsoft, if the company
is willing.

Icahn has employed a similar strategy in the past. His pressure helped to bring Oracle back to a deal with BEA Systems.

Mr. Icahn was unsure whether he
would nominate a full or partial slate of candidates to try to replace
Yahoo's 10-person board. A shareholder vote on any such nominees would
take place at Yahoo's annual shareholder meeting on July 3....Other activist hedge-fund managers also are eyeing Yahoo and deciding
whether to become involved in any fight. Scott Galloway, founder of
investment firm Firebrand Partners LLC, and his firm are examining the
situation and may get involved, according to people close to the
matter. Mr. Galloway, who waged an activist campaign against New York
Times Co. that recently netted him a board seat, declined to comment. A
person familiar with the matter said that he and Mr. Icahn were not
currently coordinating their efforts.